Telehealth Expansion Would Hardly Change Medicare Costs, CBO Says

Ken Terry

August 03, 2017

The telehealth provisions of the Chronic Care Act of 2017 would have a relatively small effect on Medicare spending over the next 10 years, according to the Congressional Budget Office (CBO). This bill is one of several measures with telehealth components that are pending in Congress.

The Senate version of the legislation, S. 870, would expand the use of telehealth services for Medicare beneficiaries, partly by lifting the geographic limitations that Medicare now imposes on these services.

For example, the bill would increase the ability of accountable care organizations (ACOs) to receive Medicare payments for telehealth services, beginning in 2020. It would eliminate the geographic component of the originating site requirement and would allow ACOs to receive Medicare payments for telehealth supplied in a patient's home. The CBO estimates that this provision would increase Medicare spending by about $50 million from 2018 to 2027.

S. 870 would also remove the geographic restriction for telestroke services, starting in 2021. Telestroke consultations can save lives by allowing neurologists in remote locations to examine and diagnose patients quickly, while there is still time to treat stroke victims effectively.

The CBO estimated that if the bill passed, the percentage of strokes occurring in Medicare patients in nonrural areas that would be handled via telestroke services would increase from 6% in 2021 to 14% in 2027.

As a result, the CBO analysts said, Medicare spending by both federal and nonfederal providers would increase in the year in which a patient received telestroke services and would decline in subsequent years. This would include a rise in post–acute care (PAC) costs during the 90 days after hospital discharge because more patients would go to PAC facilities who would otherwise have died. Long-term care costs, however, would decline because fewer people would be discharged with disabilities.

Medicare doesn't cover long-term nursing home care, so much of these savings would accrue to patients, private payers, and state Medicaid programs, not to the federal government, the CBO said. However, it noted, the federal government would participate in Medicaid savings in the long run.

The CBO concluded that increased telestroke coverage under the bill would eventually reduce Medicare spending. But from 2018 to 2027, expansion of these services would increase spending by $180 million.

The legislation would also widen coverage of telehealth for Medicare beneficiaries who belong to Medicare Advantage plans. Under current law, these plans cannot offer telehealth coverage that exceeds what is available to traditional Medicare enrollees unless they obtain special waivers. In that case, they must use rebates that they now receive from Medicare to cover the extra costs. These rebates — which must be spent on supplemental benefits — are awarded to plans that submit bids below the program's benchmark costs for a geographic area.

In place of this system, the Chronic Care Act would allow Medicare Advantage plans to include the estimated cost of telehealth services in their yearly bids to Medicare for contracts covering 2020 and subsequent years. However, the plans could not use telehealth services to show the adequacy of their provider networks.

The CBO found that when private payers paid for telehealth services, the effects on overall spending — either up or down — tended to be small. Its analysts estimated that this provision would reduce direct Medicare spending by $80 million from 2018 to 2027.

In 2016, consulting firm Avalere Health estimated the costs of another bill that would expand Medicare's coverage of telehealth, the CONNECT for Health Act, which was reintroduced in Congress last spring. Avalere analyzed the provisions of an earlier version of that bill and found that it could yield net savings of $1.8 billion for Medicare over the course of 10 years.

The original version of the CONNECT for Health Act — like the current version — had much more sweeping telehealth provisions than does the Chronic Care Act. Even so, the wide gulf between Avalere's prediction and the CBO findings raises the question of whether telehealth would really save much money or simply result in better care.

The full text of the report is available on the CBO website.

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